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September 8, 2009
Trade Stock Online
Trade Stock Online with Penny Stocks

For those traders who would like to learn about penny stock trading this article provides tips that should help to lower the investment risk involved.

Trading volumesPenny stock investing requires that you look for consistent high volume of shares being traded. You wouldn’t just look at the average volume. You need consistent volume so you must look at the number of trades per day. You should also look at liquidity when you trade stock online with penny stocks.

Investment risk – Just because you’re investing in penny stocks as opposed to regular stocks doesn’t mean you won’t lose big. You still must realistic about the stocks you are investing in and must be sure to do your research.

Profitability – You must look at and determine whether or not the company that you are adding to your list of penny stocks knows how to make a profit. Find out if the company will have to seek additional financing and why. Will they need to seek joint partnership at some point? Once you determine the company can make a profit, you should be in pretty good shape to trade stock online. The company should use that money to grow their business therefore increasing shareholder value.

Trading Strategies – penny stocks are extremely volatile so you must have a trading plan in place. This trading plan must include your trading strategies and your entry and exit plan. You must also be sure you are disciplined and that you follow the trading plan. Penny stocks will quickly rise and fall in value very quickly so you must have a strong plan and discipline to follow your plan.

Research – You must be sure that you don your own research before investing in stock online. There are scams that investors refer to as “pumping and dumping.” This occurs when insiders will load up on shares, then start to pump the company to unsuspecting newsletter subscribers. Then the subscribers buy stocks while the insiders begin to sell! You must watch out and ensure that this does not happen to you. Of course not all newsletters are bad, but you must consider the source of the newsletter. You must subscribe and track your own investments.

Portfolio Diversification - Many investors believe that you should not invest more than 20% of your portfolio into penny stocks when you trade stock online.

Continue to do your own research to determine whether or not penny stocks are something that you want to begin investing in.

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